Question

In: Accounting

At the beginning of 2017, the Mini Construction Company received a contract to build an office...

At the beginning of 2017, the Mini Construction Company received a contract to build an office building for $1.2 million. Mini will construct the building according to specifications provided by the buyer, and the project is estimated to take four years to complete. The cost breakdown is as follows. Determine the amount of revenue and gross profit to be recognized each year. (do not include $ in your answer, round to 4 decimal places).

2017 2018 2019 2020
cost incurred during the year 224,000 331,000 333,000 200,000
Estimated cost to complete 800,000 555,000 222,000 0
2017 2018 2019 2020
Revenue to be recognized in this period
Gross Profit

Solutions

Expert Solution

Solution

2017 2018 2019 2020
Revenue to be recognized in this period $                262,500 $           337,500 $                360,000 $              240,000
Gross profit $                   38,500 $                6,500 $                  27,000 $                 40,000

Working

2017 2018 2019 2020
A Contract Price $ 1,200,000 $ 1,200,000 $ 1,200,000 $ 1,200,000
B Cost Incurred to Date $ 224,000 $ 555,000 $ 888,000 $ 1,088,000
C Estimated cost yet to be incurred to complete the contract $ 800,000 $ 555,000 $ 222,000
D = B+C Total Cost $ 1,024,000 $ 1,110,000 $ 1,110,000 $ 1,088,000
E = (D/B) x 100 % of Completion 22% 50% 80% 100%
F = A x E Revenue to date $ 262,500 $ 600,000 $ 960,000 $ 1,200,000
G Revenue of Previous year $ 0 $ 262,500 $ 600,000 $ 960,000
H = F - G Net Revenue this year $ 262,500 $ 337,500 $ 360,000 $ 240,000
I Cost to date $ 224,000 $ 555,000 $ 888,000 $ 1,088,000
J Cost to date of previous year $ 0 $ 224,000 $ 555,000 $ 888,000
K = I - J Net Cost for the year $ 224,000 $ 331,000 $ 333,000 $ 200,000
L = H - K Gross Profits $ 38,500 $ 6,500 $ 27,000 $ 40,000

Related Solutions

At the beginning of 2013, the Harding Construction Company received a contract to build an office...
At the beginning of 2013, the Harding Construction Company received a contract to build an office building for $10 million. Harding will construct the building according to specifications provided by the buyer, and the project is estimated to take three years to complete. According to the contract, Harding will bill the buyer in installments over the construction period according to a prearranged schedule. Information related to the contract is as follows: 2013 2014 2015 Cost incurred during the year $2,300,000...
Kingbird Construction Company has entered into a contract beginning January 1, 2017, to build a parking...
Kingbird Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $594,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $896,000. The following data pertain to the construction period. 2017 2018 2019 Costs to date $267,300 $463,320 $606,000 Estimated costs to complete 326,700 130,680 –0– Progress billings to date 268,000 547,000 896,000 Cash collected to date...
Ivanhoe Construction Company has entered into a contract beginning January 1, 2017, to build a parking...
Ivanhoe Construction Company has entered into a contract beginning January 1, 2017, to build a parking complex. It has been estimated that the complex will cost $599,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $905,000. The following data pertain to the construction period. 2017 2018 2019 Costs to date $257,570 $413,310 $609,000 Estimated costs to complete 341,430 185,690 –0– Progress billings to date 270,000 551,000 905,000 Cash collected to date...
Problem 1: Long-Term Contract At the beginning of 2018, the Harding Construction Company received a contract...
Problem 1: Long-Term Contract At the beginning of 2018, the Harding Construction Company received a contract to build an office for $5 million. Harding will construct the building according to the specifications provided by the buyer, and the project is estimated to take three years to complete. According to the contract, Harding will be the buyer in installments over the construction period according to a prearranged schedule. Information related to the contract is as follows: 2018                    2019                2020...
Problem 1: Long-Term Contract At the beginning of 2018, the Harding Construction Company received a contract...
Problem 1: Long-Term Contract At the beginning of 2018, the Harding Construction Company received a contract to build an office for $5 million. Harding will construct the building according to the specifications provided by the buyer, and the project is estimated to take three years to complete. According to the contract, Harding will be the buyer in installments over the construction period according to a prearranged schedule. Information related to the contract is as follows: 2018                    2019                2020...
A construction company entered into a fixed-price contract to build an office building for $28 million....
A construction company entered into a fixed-price contract to build an office building for $28 million. Construction costs incurred during the first year were $8 million and estimated costs to complete at the end of the year were $12 million. During the first year the company billed its customer $10 million, of which $4 million was collected before year-end. What would appear in the year-end balance sheet related to this contract using the percentage-of-completion method? (Enter your answers in whole...
A construction company entered into a fixed-price contract to build an office building for $38 million....
A construction company entered into a fixed-price contract to build an office building for $38 million. Construction costs incurred during the first year were $12 million and estimated costs to complete at the end of the year were $18 million. During the first year the company billed its customer $14 million, of which $7 million was collected before year-end. What would appear in the year-end balance sheet related to this contract using the percentage-of-completion method? (Enter your answers in whole...
At the beginning of 2012, Massachusetts Road Construction entered into a contract to build a road...
At the beginning of 2012, Massachusetts Road Construction entered into a contract to build a road for the government. Construction will take 3 years. The following information as of December 31st, 2012 is available for the contract: Total revenue according to contract $15,000 Updated estimated cost in 2013-2014 period $7,200,000 Cost incurred during 2012 $4,800,000 Assume that the company estimates percentage complete based on costs incurred as a percentage of total estimated costs. Under the Percentage-of-Completion method, how much revenue...
Teal Construction Company has entered into a contract beginning January 1, 2020, to build a parking...
Teal Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $597,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $908,000. The following data pertain to the construction period. 2020 2021 2022 Costs to date $286,560 $453,720 $609,000 Estimated costs to complete 310,440 143,280 –0– Progress billings to date 273,000 548,000 908,000 Cash collected to date...
Sheffield Construction Company has entered into a contract beginning January 1, 2020, to build a parking...
Sheffield Construction Company has entered into a contract beginning January 1, 2020, to build a parking complex. It has been estimated that the complex will cost $595,000 and will take 3 years to construct. The complex will be billed to the purchasing company at $903,000. The following data pertain to the construction period. 2020 2021 2022 Costs to date $279,650 $487,900 $606,000 Estimated costs to complete 315,350 107,100 –0– Progress billings to date 272,000 545,000 903,000 Cash collected to date...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT